Development of the European Strategy for Employment

 

Michel Biart
 

THE STARTING POINT

Employment appeared rather late as an objective of Community policy. It is in the Maastricht Treaty, signed on 7 February 1992, that the promotion of a high level of employment was included as one of the objectives of the European Community. Since then, however, its paramount importance has been repeatedly recognised. For example, the Commission White Paper Growth, Competitiveness, Employment of 1993 begins with the statement Why this White Paper? The one and only reason is unemployment.

The White Paper sets out most of the ideas which are still advocated as the basic elements of the European strategy for Employment. For example it supports strongly consensual wage moderation as a condition for increased profitability of investment and therefore as a prerequisite for enhanced growth and competitiveness in Europe. It points out also that budgetary consolidation and wage moderation are essential to allow for accommodating monetary policy without fuelling an inflationary spiral. The White Paper advocates major investments in trans-European infrastructure (TENs) and in information networks to increase competitiveness. It insists on the importance of lifelong education and training to boost labour productivity, but it advises also Member States to reduce non-wage labour cost by 1% to 2% of GDP, in order to improve employability particularly of low productivity workers. It underlines the importance of labour flexibility and encourages efforts to meet new needs and potentialities, for example those related to local communities, environmental protection requirements and scope for improving the quality of life.

THE ESSEN PROCESS

The White Paper initiated a major debate at all levels including the one of Heads of States and Governments. When it met in Brussels, in December 1993, the European Council decided to implement an action plan consisting of a general framework for the policies to be pursued at Member State level to promote employment, specific accompanying measures to be conducted at Community level and a monitoring procedure. Work on the structuring of the plan continued till December 1994 when, in Essen, the European Council took three decisions:

1.- Five points were highlighted for policy purposes

  1. Improve employment opportunities for the labour force by promoting investment in vocational training;
  2. Increase the employment content of growth through a more flexible organisation of work, moderate wage agreements and the promotion of initiatives particularly at regional and local levels;
  3. Reduce non-wage labour costs extensively enough to ensure that there is a noticeable effect on decisions concerning the taking on of employees and in particular of unqualified employees;
  4. Improve effectiveness by moving from a passive to an active labour market policy;
  5. Help groups particularly hard hit by unemployment: school leavers without qualification, long-term unemployed, unemployed women and older employees.
2.- Member States were invited to transpose the 5 points into multiannual programmes.

3.- The Council (Labour and Social Affairs and Economic and Financial Affairs) and the Commission were asked to keep track of employment trends, monitor policies and report annually to the European Council.

In 1995/96, the European Council enriched the so-called Essen process. In particular, it insisted on the mutually reinforcing effects of sound macroeconomic policies and of the structural policies advocated in Essen. It broadened its interest in women by defining the goal of achieving equal opportunities for women and men in working life. To promote the active use of unemployment benefits, the European Council emphasised the need for reform of public employment services. It advocated a selective restructuring of public expenditure that encourages investment essential for competitiveness and that gives priority to active policies for employment. In line with the Confidence Pact proposed by the Commission, it supported the conclusion of Territorial and Local Employment Pacts due to mobilise local actors and to exploit notably new sources of employment.
 

THE PUTTING INTO EFFECT OF THE AMSTERDAM TREATY

By the end of 1996, the Community was moving into a second phase of employment promotion. This led to the inclusion of a new Employment Title in the Amsterdam Treaty. The Intergovernmental Conference expressed thereby the political will to pursue the European construction in a balanced way. Next to the single market for goods, services and capital due to be completed by the realisation of EMU, there is a need for labour markets sufficiently effective to promote employment and reduce unemployment. This is a must if European citizens are to be convinced that the Community is good for them.

The Employment Title does not, for sure, imply a U-turn in the Community outlook. Employment policy keeps belonging to Member States’ area of competence. However, the Amsterdam Treaty requires that national policies be coordinated in a strategic perspective. The coordinated strategy is outlined in the Treaty. Emphasis is put on the need to promote a skilled, trained and adaptable workforce as well as labour markets responsive to economic change.

The Treaty provides a basis for this coordination process by stating that Member States shall regard promoting employment as an issue of common concern. This expression is used also in the case of economic policies. It is indeed clear that in both domains Member States must be guided by the same principles. If this approach was not adhered to, unilateral actions could be harmful for other Member States. For example, if a Member State did not pay any attention to wage moderation, this could lead to excessive demands for wage increases in other Member States. In order to avoid steep rises in prices, monetary authorities could then consider necessary to raise short-term interest rates, which would have an adverse effect on economic activity and on employment throughout the Community.

A contrario, if employment is really a common concern for Member States, they will naturally share their experiences of promoting employment and fighting unemployment. This explains why the exchange of best practices has taken much importance, and why Member States are considering the possibility of transposing successful political initiatives in their own setting and of achieving performances in line with the results registered in other Member States (the so-called benchmarking process). Member States are working in this spirit since the Dublin European Council of December 1996, in the framework notably of a consultative committee on employment and labour market issues established at the time and subject of a new article of the Amsterdam Treaty.

The coordination process of employment policies is precisely defined in the Employment Title, and Heads of State and Government have decided in Luxembourg, last November, to apply it by virtue of a political agreement, pending the ratification of the Amsterdam Treaty. While building on what had been agreed in Essen, the process introduces new elements similar to those in use for the coordination of economic policies. The consistency of both exercises is indeed required in the Employment Title.

The main innovation is the yearly adoption by the Council, on a Commission proposal, of employment guidelines which will inspire Member States in their employment policies. The first set of guidelines was proposed by the Commission last October and agreed by a special session of the European Council, last November, before their formal adoption by the Council on 15 December 1997. The 19 guidelines are structured around 4 main themes:

  1. the promotion of the employability of the workforce so that the supply of labour is of the appropriate quality;
  2. the fostering of a spirit of entrepreneurship in order to promote a demand matching supply on the labour market;
  3. the development of the adaptability of employers and of employees, in a spirit of partnership, to favour appropriate responses of firms to economic change with the active support of the social partners;
  4. the search for equal opportunities in working life, primarily for women and men but also to the benefit of groups at a disadvantage, such as the disabled.
Through these guidelines, the Community is pushing for active and responsive labour market policies. The aim is to create not only more but also better jobs and gradually to catch up with the US and Japan as regards the rate of employment of people of working age. Little more than 60% of them have a job at present in the European Union while it is the case for some 74% of people of working age in the US and in Japan. The Commission considers that strong growth, of the order of 3% a year, coupled with the structural reforms advocated in the employment guidelines could raise the Community employment rate to 65% within 5 years. Correspondingly, the unemployment rate could fall to 7% from above 10% at present.

The employment guidelines are similar in substance to the proposals contained in the White Paper of 1993 and to the strategy outlined in Essen. However, they benefit from a much stronger political momentum and they have arisen higher expectations than the Essen process ever had. Member States are completing the transposition of the guidelines into National Employment Action Plans which replace the Multiannual Programmes drawn up after Essen. These plans will be examined by the Cardiff European Council in June, on the basis of a first assessment by the Commission. Implementation work will proceed in the second half of the year so that, in Vienna, next December, Heads of State and Government will be able to assess progress made in transposing the plan into legal, administrative and budgetary measures. The Council and the Commission will jointly prepare a report to that effect, in conformity with the practice since Essen and with the provisions of the new Employment Title. The European Council in Vienna will also agree employment guidelines for 1999, to take new developments and requirements into account.

We are at the beginning of a second convergence process and there is high hope that emulation will bring significant progress.

 
31-03-1998


BACK HOME CONTACT